Private Limited Company Forms of Business Ownership

Objectives  Define a private limited company in their own words.  Describe the advantages and disadvantages of a private limited company.  Describe limited liability in their own words.

What is a private limited company  A private limited company is where between 1 and 50 people come together and form a business  The owners are called shareholders and they invest money in the company  The profit is divided up among the shareholders and distributed in the form of dividends  “Ltd.” is written after the name of the company  The annual accounts are sent to the Registrar of Companies. They are not published

Limited Liability  If a private limited company goes bankrupt, i.e has debts they are unable to pay back, the shareholders will only lose the amount they invested in the company.

Advantages of a Private Limited Company  Shareholders have limited liability  Extra capital is available to fund expansion of the business  Continuity of existence

Disadvantages of a Private Limited Company  Costly to set up  A lot of legal requirements when forming a company  Shares cannot be transferred to the general public